MGMT 475 Chp 7

Technical standards do not play any role in product differentiation. (T/F)

F

Microsoft’s near monopoly substantially reduces the risks facing the makers of complementary products and the costs of those products. (T/F)

T

Antibody Solutions is a company that specializes in cell-bank storage, and producing antibodies for bacterial and viral infections. It is not considered a high-tech company since it is not technically in the computer or software industry, which is typically considered high-tech. (T/F)

F

Battles to set and control technical standards in a market are referred to as product positioning. (T/F)

F

The layout of the keys on a computer keyboard is an example of a technical standard. (T/F)

T

Technical standards are often set by cooperation among businesses, without government help. (T/F)

T

A set of related technical standards that specify the common set of features or design characteristics of a product is called a dominant design. (T/F)

T

A technical standard helps to guarantee compatibility between products and their complements. (T/F)

T

Ownership of an industry standard that is protected from imitation by patents and copyrights is a weak organizational resource. (T/F)

F

Network effects arise in industries where the size ofthe”network” of complementary products is a primary determinant of demand for an industry’s product. (T/F)

T

Digital music downloads have high marginal costs. (T/F)

F

When two or more companies are competing with each other to get their technology adopted as a standard in an industry, and when network effects and positive feedback loops are important, the company that wins the format war will be the one whose strategy best exploits positive feedback loops. (T/F)

T

Companies that are locked out of a market are those in which consumers are unwilling to bear the switching costs required for them to abandon the established standard and adopt the new one. (T/F)

T

Switching costs are the costs that consumers must bear to switch from a product based on one technological standard to a product based on another technological standard. (T/F)

T

It is important for a company to make sure that, in addition to the product itself, there is an adequate supply of complements to win a format war. (T/F)

T

Microsoft Word, the word-processing software, is so easy to use and has so many useful features that no other software can compete with it. Therefore, Microsoft Word can be described as a killer application. (T/F)

T

When a company is trying to win a format war, it should license its format for a low fee rather than a high fee (T/F)

Aggressive marketing is a key factor in jump-starting demand to get potential early adopters to bear the switching costs associated with adopting a new innovation. (T/F)

T

In many high-tech industries, the fixed costs of developing a product are very high, but the costs of producing one extra unit of the product are very low. (T/F)

T

One important advantage of being a first mover is that it guarantees success. (T/F)

F

Marginal costs in high-technology industries tend to stay very low as production rises. (T/F)

T

An example of an important complementary asset is a state-of-the-art manufacturing facility. (T/F)

T

The law of diminishing returns states that marginal costs fall as a company tries to expand output. (T/F)

F

One strategy for success in high-tech industries is to keep prices low in order to increase sales volume. (T/F)

T

Even if they are constrained by a lack of capital, research shows that new entrants should avoid partnering with a larger company. (T/F)

F

Technological paradigm shifts occur when new technologies revolutionize the structure of the industry, dramatically alter the nature of competition, and require companies to adopt new strategies to survive. (T/F)

T

Which of the following statements is true of technology in industries?

Technology in industries is revolutionizing aspects of the product even in those not typically considered high- tech.

refers to a common set of features in a computer or other machines.

Dominant design

Consumers will bear the costs of switching technologies if:

the benefits of adopting the new technology outweigh the costs of switching.

Technical standards in high-technology industries are:

specifications that producers adhere to when making a product or a component.

With reference to high-technology industries, which of the following is an example of a technical standard?

The layout of keys on a keyboard

When standards are part of the public domain, they can be used:

freely by any company.

With reference to high-technology industries, which of the following statements is true about technical standards?

They emerge because there are economic benefits associated with them.

With reference to technical standards, a dominant design refers to:

a common set of features or design characteristics.

Which of the following statements is true about establishing technical standards?

Technical standards are often set by cooperation among businesses, without government help.

Format wars, in the context of high-technology industries, refer to:

battles to control the source of differentiation, and thus the value that the differentiation can create for the
customer.

Network effects arise in an industry where:

the size of the network of complementary products is a primary determinant of demand for an industry’s product.

There is a set of fixed specifications for turbine blades for jet engines. The specifications include the material that needs to be used to manufacture the blades and also the specific dimensions that they need to have; the same specifications are used by all manufacturers. In this scenario, the specifications for jet blades can be referred to as:

technical standards.

Switching costs, in the context of technology industries, refer to the costs that:

customers need to bear to abandon an established standard and adopt a new standard.

In order to work towards winning a format war, a company should:

develop its own killer applications.

Libra Electronics has invented a new technology to make laptops that are extremely lightweight and unbreakable.
The company is advertising aggressively and wishes to create demand for its new range of laptops. To attract customers, the company has priced the laptops attractively. However, in order to make profits, the company has priced the batteries required for the laptops extremely high. Which of the following is illustrated in this scenario?

razor and blade strategy

Venus Corp. a high-technology, gadget-making company has introduced a gaming console with attractive features.
Even though the console is priced modestly and has better features than the existing ones, it has failed as many customers are apprehensive about buying it. In order to create demand, Venus Corp. should:

ensure that there are adequate complementary products.

are applications or uses of a new technology or product that are so compelling that customers adopt them in droves, curbing the demand for competing formats.

Killer applications

What advice would you give to a firm that wants to exploit network effects?

Create incentives for other firms to develop complementary products.

Which of the following strategies should a company NOT adopt if it wants to win a format war?

Charging extremely high license fee for the technology

An adequate supply of complements to a product results in:

more customers opting for the product.

Cooperating with competitors:

reduces competition in the market.

The various strategies that companies should adopt to win format wars revolve around:

making network effects work in their favor and against their competitors.

Mathernatica 1.0 was one of the most distinctive applications for the short-lived NeXT Computer. It still sets the standard for symbolic math and visualization on Windows, Mac, Linux, and Unix. Mathernatica 1.0 can be described as a(n) application.

killer

Aggressive marketing in the context of format wars:

helps a company jump-start demand.

Cellular phone service providers often sell the phone itself at very low prices and then charge a relatively high fee for usage. This illustrates:

the razor and blade strategy.

Marginal cost refers to the costs of:

producing one extra unit of product.

Which of the following statements is true about marginal costs in high-technology industries?

They include the costs of packaging and product distribution.

Consider a cost curve with production volume on the horizontal axis and marginal costs on the vertical axis. What shape would the marginal cost curve most resemble in a high-tech industry?

Straight and flat

Which of the following is NOT true of high-technology industries?

First movers cannot create switching costs for their customers.

Which of the following is an advantage offrrst movers?

They have an opportunity to exploit network effects and positive feedback loops.

Which of the following is a disadvantage of first movers?

They run the risk of building the wrong resources and capabilities.

Which of the following is NOT a basic strategy for a first mover?

Discourage development of complementary assets

When a first mover does not have complementary assets, barriers to imitation are high, and there are several capable competitors, the first mover should:

enter into a joint venture to protect the product.

An advantage of being a first mover is that:

there is an opportunity to increase sales volume ahead of rivals.

Which of the following is true offrrst movers?

The frrst mover that creates a revolutionary product is in a monopoly position.

A technological paradigm shift is most likely to occur in which stage of the industry life cycle?

Maturity

Cell phone technology is replacing traditional wired phone technology. This is an example of a(n):

technological paradigm shift.

Which of the following will NOT help an established company in addressing the potential challenge of a disruptive technology?

Asking customers if they are interested in the new technology

Technological disruption:

compels firms to adopt new business models.

Which of the following statements is true about new entrants in the context of a technological paradigm shift?

New entrants do not need to worry about their established customer base.

In case of emergence of a disruptive technology, established companies should: